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About this blog: I grew up in Los Angeles and moved to the area in 1963 when I started graduate school at Stanford. Nancy and I were married in 1977 and we lived for nearly 30 years in the Duveneck school area. Our children went to Paly. We moved ... (More)

About this blog: I grew up in Los Angeles and moved to the area in 1963 when I started graduate school at Stanford. Nancy and I were married in 1977 and we lived for nearly 30 years in the Duveneck school area. Our children went to Paly. We moved downtown in 2006 and enjoy being able to walk to activities. I do not drive and being downtown where I work and close to the CalTrain station and downtown amenities makes my life more independent. I have worked all my life as an economist focusing on the California economy. My work centers around two main activities. The first is helping regional planning agencies such as ABAG understand their long-term growth outlook. I do this for several regional planning agencies in northern, southern and central coast California. My other main activity is studying workforce trends and policy implications both as a professional and as a volunteer member of the NOVA (Silicon Valley) and state workforce boards. The title of the blog is Invest or Die and that is what I believe is the imperative for our local area, region, state and nation. That includes investing in people, in infrastructure and in making our communities great places to live and work. I served on the recent Palo Alto Infrastructure Commission. I also believe that our local and state economy benefits from being a welcoming community, which mostly we are a leader in, for people of all religions, sexual preferences and places of birth. (Hide)

The Very Temporary State Budget "Solution"

Uploaded: Aug 3, 2009

The budget adopted by the California legislature last month provides a very temporary solution to the state's continuing budget shortfalls and policy gridlock. The temporary nature of the solution is seen by the frequent use of the terms "assumes," "borrows" and "delays" in the Legislative Analyst's review of the 2009-2010 budget.

Under the heading of "assumes" and "unspecified" the Legislative Analyst counts $4.4 billion. Under "borrows, shifts or delays" the Analyst counts another $5.3 billion. For the next budget some of the temporary taxes adopted in February expire and some of the federal stimulus money goes away.

Even if the economy roars back California will face state budget shortfalls far into the future.

How has this happened? There are three principal reasons. First, in 2000 when the economy boomed the legislature with large bipartisan votes continued a series of tax cuts ($10 billion in total) and implemented increases in education and health care. Then the dot.com boom disappeared and the state has faced a structural budget gap between normal year revenues and spending ever since.

Second, California and other states face plunging revenues from the nation's deep and continuing recession. A large part of what we face today is nobody's fault and the choices we face as a state are between bad and bad. I think additional federal aid to all states and localities is needed for this no-fault dilemma but that does not seem to be in the political cards today.

Additional federal aid is especially justified for health and social service programsour safety net against getting wiped out by misfortune. States are powerless to protect the safety net when recessions cause deep cuts in revenues. States have to produce balanced budgets and as the just adopted California budget shows, that means fewer people will be covered by public health and social service programs at exactly the time when more and more people need help.

But there is a part of California's continuing budget saga that is our fault and for which we need to find a solution. Residents tell leaders don't cut services, don't raise my taxes (maybe you can raise someone else's taxes) and elected leaders say "we hear you loud and clear."

And then there is the constant barrage of chatter about "living within our means" and "excessive state spending" even though with the recent budget cuts, today's spending is far below the increase in caseloads and inflation over the past ten years. And the share of the state economy that goes to the state budget in 2009-2010 will be the lowest since Proposition 13 was passed in 1978.

On the other hand we passed $12 billion in temporary tax increases just to maintain the challenging situation we are in now.

The challenge is that without these or alternative taxes in 2011 or beyond and even with a strong economy there is no way to reverse any of the cuts to education that were recently passed and probably no easy way to pay back the money to education and local governments that has been promised.

It is easy to blame elected leaders who seem to have difficulty agreeing on much of anything in California. But until we as residents find a way to send them a clear message with budget arithmetic that adds up, we are part of the problem and not part of the solution.

Posted by stephen levy,
a resident of ,
on Aug 4, 2009 at 3:19 pmstephen levy is a registered user.

Hi James,

A while back on your post you asked

"Stephen, what are your opinions?"

More recently you wrote

"I notice that Stephen Levy has posted his opinions, today, on his own exclusive blog. Nevertheless, I would request that he respond to my post, since I responded to his."

You asked for my opinions and then stated that I posted my opinions. Sounds like I did what you asked.

As far as this new "exclusive" dig at my restricted blog, we have gone over this a lot.

Registering takes maybe 3-5 minutes and requires that you give the Weekly your email address. Posting can be anonymous and editing is done by the Weekly. if you have quesions about this ask the editors.

Since people register on and give their email address to lots of commercial sites this does not seem a big barrier to me but possibly it is more than you want to and that is fine.

To clarify another accusation, I think speaking candidly aobut public officials us a great American tradition. I am completely satisfied with the way that the Weekly is treating political posts and have no desire to suggest any stricter standards for talking about Obama and Bush.

I continue to think that a different set of standards should apply to comments about other posters and my proposed experiments in editorial style deal only with comments directed at other posters--not elected officials.

Posted by PAmoderate,
a resident of ,
on Aug 5, 2009 at 11:29 amPAmoderate is a registered user.

"today's spending is far below the increase in caseloads and inflation over the past ten years"

This is a tricky use of statistics. 10 years ago is 1999, and we were in the midst of the uptick in the dot.com madness (and massive increase in spending). You should go back to before this time and then measure inflation / population increase.

"California illustrates the problem. Adam Summers of the libertarian Reason Foundation in Los Angeles has calculated that if it "had simply limited its spending increases to the 4.38 percent average annual increase in the state's consumer price index and population growth each years since fiscal year 1990-91, the state would be sitting on a $15 billion budget surplus right now."

My opinion is that we have spending problem more than a revenue problem.

Posted by PAmoderate,
a resident of ,
on Aug 5, 2009 at 11:29 amPAmoderate is a registered user.

"today's spending is far below the increase in caseloads and inflation over the past ten years"

This is a tricky use of statistics. 10 years ago is 1999, and we were in the midst of the uptick in the dot.com madness (and massive increase in spending). You should go back to before this time and then measure inflation / population increase.

"California illustrates the problem. Adam Summers of the libertarian Reason Foundation in Los Angeles has calculated that if it "had simply limited its spending increases to the 4.38 percent average annual increase in the state's consumer price index and population growth each years since fiscal year 1990-91, the state would be sitting on a $15 billion budget surplus right now."

My opinion is that we have spending problem more than a revenue problem.

Posted by stephen levy,
a resident of ,
on Aug 9, 2009 at 12:24 pmstephen levy is a registered user.

PA Moderate,

The Reason Foundation folks are competent economists but the data you cite is way out of date and not a sound basis for your opinion about state spending.

The General Fund budget in 1990-91 was $40.3 billion. The budget just approved in July includes $84.5 billion in General Fund spending. For these 19 years, the average growth in spending was 3.98% and your figure of a $15 billion surplus is not accurate.

It is easy to remember the budgets of a few years ago and overlook the dramatic cuts in services and spending that have happened since.

Moreover, population is not the same as caseload (for example the prison population has surged) and a general measure of inflation underestimates the impact on the state budget of high health care cost increases over the past 2 decades.

In addition, the budget numbers cited above include an artificial increases of state aid to education that was required to offset a loss in local property tax revenue when the vehicle license fee was cut. If you include that the average spending gain since 1990-91 was 3.68%.

Another way to compare 1990-91 with 2009-10 (both recession years) is to look at the share of residents' income going to the General Fund. In the 1990-91 budget it was 6.21 cents per dollar of income and in 2009-10 it will be roughly 5.4 cents per dollar of income.

There are lots of legitimate debates over the best way to handle this very difficult situation we are in from 1) the recesion and 2) our failure to balance the budget in good times.

But to repeat that California has a "spending problem" by citing out of date data is not helpful and also overlooks the $10 billion in tax cuts that we approved as one way to "spend" peak revenues in the dot.com boom years.

The budget is one of the immense challenges facing California, many of which do not have easy or painless answers.

My own view is that we need to try and come together and find our connection to a common future--the American values that have bound us together and saw families undergo sacrifices in war and depression to build a better future for themselves and future generations.